UPDATE 1-China growth to gain pace in H2-industry ministry

July 24, 2012|Reuters

* China economy set for H2 pick-up as policies gain traction

* Industry still facing downward pressure at home and abroad

* Latest Reuters poll forecasts 2012 growth of 8 pct

BEIJING, July 25 (Reuters) - China's economic growth willlikely pick up in the second half of 2012 as a raft of policiesrolled out to boost economic activity gain traction, theMinistry of Industry and Information Technology said onWednesday.

However, the ministry warned the world's No 2 economy stillfaces severe challenges at home and abroad and that authoritiesshould not underestimate the impact on the corporate sector fromslowing demand.

"We can see relatively clear signs from the industry sectorthat the economy is stabilising," Zhu Hongren, the ministry'schief engineer, told a news conference.

"But we still need to bear in mind that the foundation ofstability in the industry sector is fragile and the downwardpressure is still with us," Zhu said.

The policy response has left the world's second-biggesteconomy on course for a soft landing, according to a new reportfrom the International Monetary Fund published on Wednesday, butstill facing downside risks from stiffening global headwinds andpotential spillover effects if Europe's debt crisis deepens.

China's economy expanded at its slowest pace in more thanthree years in the second quarter of 2012, growing 7.6 percentfrom the same period a year earlier - just a whisker above theofficial government target for the year of 7.5 percent.

Quarter-on-quarter, the data showed a sequentialimprovement, as did a clutch of accompanying indicators, thoughthe economy remains on course for its lowest full year of growthsince 1999.

The latest benchmark Reuters poll forecasts China's growthto hit 8 percent for the full year, down from the 8.4 percentmarket consensus three months earlier.

China's flash factory purchasing managers index rose in Julyto its highest level since February, boosted by a pick up inoutput and signs of improvement in new export orders thatoffered relief to struggling financial markets.

Still, the HSBC Flash China manufacturing purchasingmanagers index (PMI) released on Tuesday showed activity shrankfor the ninth month in a row, while the employment sub-indexfell to a 40-month low.

Analysts polled by Reuters earlier this month expect onemore cut to interest rates of 25 basis points and 100 bps ofcuts to banks' required reserve ratios by the end of the year.